Annual Wage Review 2017–18 - [2018] FWCFB 3500

[2018] FWCFB 3500

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009

s.285—Annual wage review

Annual Wage Review 2017–18

(C2018/1)

JUSTICE ROSS, PRESIDENT
VICE PRESIDENT HATCHER
DEPUTY PRESIDENT ASBURY
COMMISSIONER HAMPTON
MR COLE
PROFESSOR RICHARDSON
MR GIBBS

SYDNEY, 1 JUNE 2018

Contents

Paragraph
1.	Overview and the Decision	[1]
2.	Economic and Labour Market Considerations	[109]
3.	Relative Living Standards and the Needs of the Low Paid	[263]
4.	Other Relevant Considerations	[372]
5.	Transitional Instruments and Other Matters	[437]
6.	Conclusion	[488]
Appendix 1—Research for Annual Wage Reviews
Appendix 2—Proposed Minimum Wages Adjustments
Appendix 3—Index of Material
Appendix 4—List of Appearances

Abbreviations

2009–10 Review decision	Annual Wage Review 2009–10 decision
2010–11 Review decision	Annual Wage Review 2010–11 decision
2011–12 Review decision	Annual Wage Review 2011–12 decision
2012–13 Review decision	Annual Wage Review 2012–13 decision
2013–14 Review decision	Annual Wage Review 2013–14 decision
2014–15 Review decision	Annual Wage Review 2014–15 decision
2015–16 Review decision	Annual Wage Review 2015–16 decision
2016–17 Review decision	Annual Wage Review 2016–17 decision
2017–18 Review decision	Annual Wage Review 2017–18 decision
2018–19 Review	Annual Wage Review 2018–19
AAWI	average annualised wage increase
ABI and NSWBC	Australian Business Industrial and the NSW Business Chamber Ltd
ABS	Australian Bureau of Statistics
ACCI	Australian Chamber of Commerce and Industry
ACCER	Australian Catholic Council for Employment Relations
ACOSS	Australian Council of Social Service
Act	Fair Work Act 2009 (Cth)
ACTU	Australian Council of Trade Unions
AFEI	Australian Federation of Employers and Industries
AHA	Australian Hotels Association
Ai Group	Australian Industry Group
All Trades matter	All Trades Queensland Pty Limited v CFMEU and Ors
ANZSIC	Australian and New Zealand Standard Industrial Classification
APCSs	Australian Pay and Classification Scales
Apprentices decision	Modern Awards Review 2012—Apprentices, Trainees and Juniors, [2013] FWCFB 5411
ARA	Australian Retailers Association
AWE	average weekly earnings
AWOTE	average weekly ordinary time earnings
AWRS	Australian Workplace Relations Study
C4	Engineering Associate/Laboratory Technical Officer Level 1
C10	Engineering/Manufacturing Tradesperson Level 1
C14	Engineering/Manufacturing Employee Level 1
CCIQ	Chamber of Commerce and Industry Queensland
CCIWA	Chamber of Commerce and Industry Western Australia
CCS	Child Care Subsidy
Commission	Fair Work Commission
CPI	Consumer Price Index
CURF	confidentialised unit record file
DSP	Disability Support Pension
ERO	Equal Remuneration Order
EEH	Survey of Employee Earnings and Hours
EHDI	equivalised household disposable income
FMW	Federal Minimum Wage
FTB	Family Tax Benefit
GDP	gross domestic product
GFC	global financial crisis
GVA	gross value added
HES	Household Expenditure Survey
HIA	Housing Industry Association
HILDA	Household, Income and Labour Dynamics in Australia
IMF	International Monetary Fund
LCI	Living Cost Index
Manufacturing Award	Manufacturing and Associated Industries and Occupations Award 2010
MGA	Master Grocers Australia
MIHL	Minimum Income for Healthy Living
Miscellaneous Award	Miscellaneous Award 2010
NAB	National Australia Bank
NAPSA	Notional Agreement Preserving State Awards
NBER	National Bureau of Economic Research
NCVER	National Centre for Vocational Education Research
NLW	National Living Wage
NMW	national minimum wage
NRA	National Retail Association
NSA	Newstart Allowance
NTWS	National Training Wage Schedule
OECD	Organisation for Economic Co-operation and Development
Panel	Expert Panel for annual wage reviews
Penalty Rates decision	4 yearly review of modern awards – Penalty Rates – hospitality and retail industries decision
Penalty Rates Review decision	Shop, Distributive and Allied Employees Association v The Australian Industry Group and Others
PPP	Purchasing Power Parity
RCI	Restaurant and Catering Industrial
RBA	Reserve Bank of Australia
Review	Annual Wage Review
RNNDI	real net national disposable income
SAWIA	South Australian Wine Industry Association
SES Award	Supported Employment Services Award 2010
SPRC	Social Policy Research Centre
Statistical Report	Statistical Report—Annual Wage Review 2017–18
SWS	Supported Wage System
SWSS	Supported Wage System Schedule
Transitional Act	Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
UK	United Kingdom
UNSW	University of New South Wales
US	United States of America
WAD	Workplace Agreements Database
WPI	Wage Price Index

The Decision

Introduction

This Chapter summarises the matters we have considered, our reasoning and the increases we have decided upon. Chapters 2–4 of this decision deal with the statutory considerations we are required to take into account. We do not repeat that material here but the views expressed in this Chapter should be seen in the context of our decision as a whole.

The Fair Work Act 2009 (Cth) (Act) requires the Expert Panel for annual wage reviews (Panel) to conduct and complete a review of the national minimum wage (NMW) and modern award minimum wages, in each financial year (the Review). The Panel must make a NMW order and may set, vary or revoke modern award minimum wages. The NMW order applies to award/agreement free employees[1] and modern award minimum wages are the minimum wages contained in modern awards.[2]

The number of employees who have their pay set by an award is estimated to be 2.3 million or 22.7 per cent of all employees.[3] The proportion of employees that are paid at the adult NMW rate is estimated to be 1.9 per cent. Further, a significant number of employees are paid at junior or apprentice/trainee rates based on the NMW rate and modern award minimum wages. The Panel’s decision will also affect employees paid close to the NMW and modern award minimum wages and those whose pay is set by a collective agreement which is linked to the outcomes of the Review.

The Panel is required to conduct each Review within the legislative framework of the Act, particularly the object of the Act in s.3, the modern awards objective and the minimum wages objective. As part of the Review, the Panel considers both the setting of the NMW rate and whether to make any variation determinations in respect of modern award minimum wages. Each of these tasks is undertaken by reference to the particular statutory criteria applicable to each function.

The Statutory Framework

The minimum wages objective applies to the exercise of functions and powers under Part 2-6 of the Act (which includes the Review),[4] and is set out in s.284(1) of the Act:

‘284 The minimum wages objective

What is the minimum wages objective?

(1)The FWC must establish and maintain a safety net of fair minimum wages, taking into account:

(a)the performance and competitiveness of the national economy, including productivity, business competitiveness and viability, inflation and employment growth; and

(b)promoting social inclusion through increased workforce participation; and

(c)relative living standards and the needs of the low paid; and

(d)the principle of equal remuneration for work of equal or comparable value; and

(e)providing a comprehensive range of fair minimum wages to junior employees, employees to whom training arrangements apply and employees with a disability.

This is the minimum wages objective.’

The modern awards objective applies to the performance or exercise of ‘modern award powers’[5] (which are defined to include the variation of modern award minimum wages),[6] and is set out in s.134(1) of the Act:

‘134 The modern awards objective

What is the modern awards objective?

(1) The FWC must ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions, taking into account:

(a) relative living standards and the needs of the low paid; and

(b) the need to encourage collective bargaining; and

(c) the need to promote social inclusion through increased workforce participation; and

(d) the need to promote flexible modern work practices and the efficient and productive performance of work; and

(da) the need to provide additional remuneration for:

(i) employees working overtime; or

(ii) employees working unsocial, irregular or unpredictable hours; or

(iii) employees working on weekends or public holidays; or

(iv) employees working shifts; and

(e) the principle of equal remuneration for work of equal or comparable value; and

(f) the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden; and

(g) the need to ensure a simple, easy to understand, stable and sustainable modern award system for Australia that avoids unnecessary overlap of modern awards; and

(h) the likely impact of any exercise of modern award powers on employment growth, inflation and the sustainability, performance and competitiveness of the national economy.

This is the modern awards objective.’

Further, s.578(a) provides that the Panel must take into account the objects of the Act in performing its functions or exercising its powers in a Review.

Sections 134, 284 and 578 of the Act each direct the Panel to take into account certain specified considerations in conducting and completing a Review. As noted in Peko-Wallsend,[7] matters which a decision maker must ‘take into account’ are matters the decision maker is bound to consider and treat as matters of significance in the decision-making process.[8]

There is a substantial degree of overlap in the considerations the Panel is required to take into account under the minimum wages objective and the modern awards objective, though some of these considerations are not expressed in the same terms.[9] Both the minimum wages objective and the modern awards objective require the Panel to take into account:

· promoting social inclusion through increased workforce participation;[10]

· relative living standards and the needs of the low paid;[11]

· the principle of equal remuneration for work of equal or comparable value;[12] and

· various economic considerations.[13]

There are differences in the expression of the economic considerations that the Panel is required to take into account under the modern awards objective and the minimum wages objective.[14] But the underlying intention of the various economic considerations referred to in ss 134 and 284 is that the Panel takes into account the effect of its decisions on national economic prosperity and in so doing gives particular emphasis to the economic indicators specifically mentioned in the relevant statutory provisions.

The modern awards objective also requires the Panel to take into account ‘the need to encourage collective bargaining,’[15] whereas the minimum wages objective makes no express reference to any such consideration. This is relevant because it is the minimum wages objective, not the modern awards objective, which is relevant to setting the NMW rate. But as the Panel observed in the Annual Wage Review 2014–15 decision (2014–15 Review decision),[16] the fact that the minimum wages objective does not require the Panel to take this consideration into account does not make much difference, in practice, to the Panel’s task. This is because the Panel is required to take into account the object of the Act and one of the stated means by which the object of the Act is given effect is ‘through an emphasis on enterprise-level collective bargaining’ (s.3(f)). While not expressed in the same terms as in the modern awards objective, it is plain from s.3(f) and a reading of the Act as a whole that one of the purposes of the Act is to encourage collective bargaining. It is appropriate that the Panel takes that legislative purpose into account in setting the NMW rate.

We also observe that the considerations in ss.134(1)(da) and (g) have little relevance in the context of the Review.

We turn first to deal with some general aspects of the proper construction of the modern awards objective and the minimum wages objective.

The statutory tasks in ss 134 and 284 involve an ‘evaluative exercise’ which is informed by the considerations in s.134(1)(a)–(h) and s.284(1)(a)–(e). While these statutory considerations inform the evaluation of what might constitute ‘a fair and relevant minimum safety net of terms and conditions’ and ‘a safety net of fair minimum wages’, they do not necessarily exhaust the matters which the Panel might properly consider to be relevant. The range of such matters ‘must be determined by implication from the subject-matter, scope and purpose’ of the Act.[17]

The considerations which the Panel is required to take into account do not generally set a particular standard against which a modern award or the ‘safety net of fair minimum wages’ can be evaluated; many of them may be characterised as broad social objectives. As the Full Court of the Federal Court said in National Retail Association v Fair Work Commission:

‘It is apparent from the terms of s 134(1) that the factors listed in (a) to (h) are broad considerations which the FWC must take into account in considering whether a modern award meets the objective set by s 134(1), that is to say, whether it provides a fair and relevant minimum safety net of terms and conditions. The listed factors do not, in themselves, however, pose any questions or set any standard against which a modern award could be evaluated. Many of them are broad social objectives. What, for example, was the finding called for in relation to the first factor (“relative living standards and the needs of the low paid”)?’[18]

The statutory provisions relating to the Review and to NMW orders are set out in Divisions 3 (ss 284–292) and 4 (ss 293–299) of Part 2-6 of Chapter 2 of the Act. The purpose of Chapter 2 of the Act is to prescribe minimum terms and conditions of employment for national system employees (including those terms and conditions arising from a NMW order).[19] We accept that it is appropriate to characterise the statutory provisions relating to the Review and to NMW orders as remedial, or beneficial, provisions. They are intended to benefit national system employees by creating regulatory instruments which intervene in the market, setting minimum wages to lift the floor of such wages. While these statutory provisions are properly characterised as remedial or beneficial provisions, the extent to which they are to be given ‘a fair, large and liberal’ interpretation in pursuit of that broad purpose is constrained by the fact that the relevant provisions seek to strike a balance between competing interests.

Fairness is central to both the modern awards objective and the minimum wages objective. Section 134(1) refers to a ‘fair … minimum safety net’ and s.284(1) refers to ‘a safety net of fair minimum wages.’ In the Annual Wage Review 2016–17 decision (2016–17 Review decision) the Panel concluded that fairness in this context ‘is to be assessed from the perspective of the employees and employers’[20] affected by the Review decision, and noted that:

‘It seems to us that the statutory provisions relevant to the fixation of the NMW plainly seek to strike a balance between competing interests. So much is clear from the range of considerations the Panel is required to take into account in giving effect to the minimum wages objective (for example compare s.284(1)(a) and (c)). It is also clear from the minimum wages objective itself—to “establish and maintain a safety net of fair minimum wages”. Fairness in this context is to be assessed from the perspective of the employees and employers covered by the NMW order. The object of the Act also speaks to multiple legislative purposes. Section 3 provides that the object of the Act ‘is to provide a balanced framework for cooperative and productive workplace relations that promotes national prosperity and social inclusion for all Australians’ (emphasis added), by the means specified in sections 3(a) to (g).’[21]

The Australian Catholic Council for Employment Relations (ACCER) submits that the Panel’s construction of s.284(1) in the 2016–17 Review decision was erroneous and should be reconsidered.[22]

ACCER contends that a beneficial reading of s.284(1) excludes decision making being based on the application of the criterion of fairness as between employers and employees[23] and that the Panel’s ‘primary obligation’ in setting wage rates is to set a safety net wage rate that will provide a decent standard of living.[24] In particular, ACCER contends that the ‘operational objective’ of minimum wage setting under the Act is that:
‘Full time workers have a reasonable expectation of a standard of living that will be in excess of poverty and one which will enable them to purchase the essentials for a “decent standard of living” and engage in community life, assessed in the context of community norms.’[25]

ACCER acknowledges that the specified considerations in s.284(1)(a)–(e) inform and constrain this ‘operational objective.’[26]

We reject the proposition that ‘fairness’ in the context of the modern awards objective and the minimum wages objective excludes the perspective of employers.

The Panel’s conclusion in last year’s decision was based upon observations made by the Full Bench in the 4 yearly review of modern awards – Penalty Rates – hospitality and retail industries decision (the Penalty Rates decision)[27] about the proper construction of the expression ‘a fair and relevant minimum safety net of terms and conditions’ in the modern awards objective. The Full Bench’s decision was the subject of an application for judicial review to the Federal Court which was dismissed by the Full Court of the Federal Court in Shop, Distributive and Allied Employees Association v The Australian Industry Group and Others (the Penalty Rates Review decision).[28]

In the course of its judgment in the Penalty Rates Review decision the Full Court considered the expression ‘a fair and relevant minimum safety net of terms and conditions’ in the modern awards objective and held:

‘It is apparent that “a fair and relevant minimum safety net of terms and conditions” is itself a composite phrase within which “fair and relevant” are adjectives describing the qualities of the minimum safety net of terms and conditions to which the FWC’s duty relates. Those qualities are broadly conceived and will often involve competing value judgments about broad questions of social and economic policy. As such, the FWC is to perform the required evaluative function taking into account the s 134(1)(a)–(h) matters and assessing the qualities of the safety net by reference to the statutory criteria of fairness and relevance. It is entitled to conceptualise those criteria by reference to the potential universe of relevant facts, relevance being determined by implication from the subject matter, scope and purpose of the Fair Work Act…’
…
For the reasons already given it cannot be doubted that the perspectives of employers and employees and the contemporary circumstances in which an award operates are circumstances within a permissible conception of a “fair and relevant” safety net taking into account the s 134(1)(a)–(h) matters.’[29] (emphasis added)

The above observations are entirely consistent with the proposition that fairness in the context of minimum wage fixation is to be assessed from the perspective of the employees and employers affected by Review decisions.

We also reject ACCER’s submission as to the ‘operational objective’ of minimum wage setting under the Act. The proposition advanced finds no support in the words of the statute and seeks to elevate one relevant consideration (‘relative living standards and the needs of the low paid’) above all others. As the Full Court observed in the Penalty Rates Review decision:

‘It is not legitimate to take one element in the overall suite of potentially relevant considerations to the discharge of the FWC’s functions … and discern from that one matter a Parliamentary intention that the scheme as a whole is to be construed with that end alone in mind.’[30]

However, as we note later, we accept the proposition that it is reasonable for full time employees to expect a standard of living in excess of poverty. But, as noted in previous Review decisions, the Act requires the Panel to take into account all of the relevant statutory considerations,[31] and the relative living standards and needs of the low paid are but ‘one of a number of considerations that [the Panel] must take into account.’[32]

We now turn to consider some of the particular considerations which we are required to take into account.

As noted earlier, the Panel is required to take into account the need to promote ‘social inclusion through increased workforce participation’ (ss 134(1)(c) and 284(1)(b)). Consistent with past Review decisions, we interpret this to mean increased employment. We also accept however that minimum rates of pay impact upon an employee’s capacity to engage in community life and the extent of their social participation. Higher minimum wages can also provide incentives to those not in the labour market to seek paid work, which needs to be balanced against potential negative impacts of increases in minimum wages on the supply of jobs for low-paid workers. In each Review, we must take into account the employment impacts of the NMW and modern award minimum wages and any proposed increases to those rates.

The minimum wages objective and the modern awards objective both require the Panel to take into account relative living standards and the needs of the low paid when setting minimum wage rates (ss 134(1)(a) and 284(1)(c)). Those matters are different, but related, concepts.

The relative living standards of employees on the NMW and award-reliant employees are affected by the level of wages that they earn, the hours they work, tax-transfer payments and the circumstances of the households in which they live.[33] The net effect of these factors is summarised in the notion of equivalised household disposable income, a measure to which we return later in Chapter 3.

The assessment of relative living standards requires a comparison of the living standards of workers reliant on the NMW and modern award minimum wages with those of other groups that are deemed to be relevant. We particularly focus on the comparison between low-paid workers (including NMW and award-reliant workers) and other employed workers, especially non-managerial workers.[34] There is little basis for comparing the household income of the low paid and the award reliant with that of households that are principally reliant on social welfare benefits or private savings, when the purpose is to identify whether an increase in the NMW and modern award minimum wages will assist the relative standard of living of the low paid.

The assessment of the needs of the low paid requires an examination of the extent to which low-paid workers are able to purchase the essentials for a ‘decent standard of living’ and to engage in community life, assessed in the context of contemporary norms.[35] In successive Review decisions the Panel has concluded that a threshold of two-thirds of median (adult) full-time ordinary earnings provides ‘a suitable and operational benchmark for identifying who is low paid,’ within the meaning of s.134(1)(a).[36] The risk of poverty is also relevant in addressing the needs of the low paid. We accept, as we have in previous Review decisions, that if the low paid are forced to live in poverty then their needs are not being met.[37]

The modern awards objective and the minimum wages objective both provide that in a Review we must take into account ‘the principle of equal remuneration for work of equal or comparable value’ (s.134(1)(e) and s.284(1)(d)). The Dictionary section of the Act (s.10) directs attention to s.302(2) for the definition of the expression ‘equal remuneration for work of equal or comparable value.’ Section 302(2) is in Part 2-7 ‘Equal Remuneration’ and defines this expression to mean ‘equal remuneration for men and women workers for work of equal or comparable value.’ It seems highly unlikely that Parliament intended this expression to mean something different in ss 134 and 284. Hence, the appropriate approach to the construction of ss 134(1)(e) and 284(1)(d) is to read the definition into the substantive provision.[38] Accordingly, the relevant consideration is to be read as follows:

‘the principle of equal remuneration for men and women workers for work of equal or comparable value.’

In the Equal Remuneration Decision 2015[39] the Full Bench concluded that the expression ‘work of equal or comparable value’ in s.302(1) refers to equality or comparability in ‘work value.’[40] We agree and, further, the same meaning should be attributed to this expression in ss 134(1)(e) and 284(1)(d). As explained in the Equal Remuneration Decision 2015, the principle of equal remuneration for work of equal or comparable value is enlivened when an employee or group of employees of one gender do not enjoy remuneration equal to that of another employee or group of employees of the other gender who perform work of equal or comparable value. Further, as the Full Bench observed:

‘This is essentially a comparative exercise in which the remuneration and the value of the work of a female employee or group of female employees is required to be compared to that of a male employee or group of male employees.’[41]

The application of the principle of equal remuneration for work of equal or comparable value is such that it is likely to be of only limited relevance in the context of a Review. Indeed it would only be likely to arise if it were contended that particular modern award minimum wage rates were inconsistent with the principle of equal remuneration for work of equal or comparable value; or, if the form of a proposed increase enlivened the principle. We agree with the observations of a number of parties that Review proceedings are of limited utility in addressing any systemic gender undervaluation of work. It seems to us that proceedings under Part 2-7 and applications to vary modern award minimum wages for ‘work value reasons’ pursuant to ss 156(3) and 157(2) provide more appropriate mechanisms for addressing such issues.

But the broader issue of gender pay equity, and in particular the gender pay gap, is relevant to the Review. This is so because it is an element of the requirement to establish a safety net that is ‘fair.’ It may also arise for consideration in respect of s.284(1)(b) (‘promoting social inclusion through workforce participation’), because it may have effects on female participation in the workforce.[42]

The gender pay gap refers to the difference between the average wages earned by men and women. It may be expressed as a ratio which converts average female earnings into a proportion of average male earnings on either a weekly or an hourly basis.[43] The Statistical Report—Annual Wage Review 2017–18 (Statistical report) sets out three measures of the gender pay gap, ranging from 11.0 per cent to 15.3 per cent (see Table 4.1).

As noted in the Annual Wage Review 2015–16 decision (2015–16 Review decision), the causes of the gender pay gap are complex and influenced by factors such as: differences in the types of jobs performed by men and women; discretionary payments; workplace structures and practices; and the historical undervaluation of female work and female-dominated occupations.[44] We accept that moderate increases in the NMW and modern award minimum wages would be likely to have a relatively small, but nonetheless beneficial, effect on the gender pay gap.

As the Panel has observed in previous Review decisions, there is a degree of overlap between the various considerations which the Panel must take into account.[45] A degree of tension is also evident between some of these considerations, for example, the extent to which minimum wage increases are able to meet the needs of the low paid may, depending on the magnitude of the increase and the prevailing circumstances, be constrained by the potential impact of such increases on employment. No particular primacy is attached to any of these considerations,[46] and it is this complexity that has led the Panel to reject a mechanistic or decision-rule approach to wage fixation.[47]

The Act also sets out some important procedural fairness requirements for the Review. The Panel must ensure that all persons and bodies (referred to collectively as parties) are given a reasonable opportunity to make and reply to written submissions (s.289(1)). In this Review, a number of parties took this opportunity by lodging one or more written submissions and participating in consultations on 15 and 16 May 2018.

The timetable for the Review and all of the submissions, transcripts, research reports, and some additional economic data were published on the Fair Work Commission’s (Commission) website to ensure that all parties had a reasonable opportunity to participate. The Panel considered all the material received from parties, the information in the statistical report and the research referred to in the Research reference list in making its decision.

The Panel’s approach

As part of the Review, the Panel considers both the setting of the NMW rate and whether to make any determinations varying modern award minimum wages. These tasks are undertaken by reference to the particular statutory criteria applicable to each function.

The review and variation of modern award minimum wages is a separate, though related, function to reviewing and making a NMW order. In exercising its powers to set, vary or revoke modern award minimum wages, the Panel ‘must take into account the rate of the national minimum wage that it proposes to set in the Review.’[48] It follows that, as part of our decision-making process, we must first form a view about the rate of the NMW we propose to set, and then take that proposed NMW rate into account (along with the other relevant statutory considerations) in exercising our powers to set, vary or revoke modern award minimum wage rates.[49]

The range of considerations we are required to take into account calls for the exercise of broad judgment rather than a mechanistic or decision rule approach to wage fixation. It is on this basis that past Review decisions have rejected proposals for the adoption of real wage maintenance;[50] a medium term target for the NMW;[51] and the variation of modern award minimum wages based on trends in market wages.[52]

We accept that the Panel’s decision-making process should be as transparent as possible and that the Panel should disclose the factors which are most relevant in a particular year, and we have done so in this decision.

In assessing the various economic considerations, we take into account both actual data and forecasts. The actual indicators are the primary consideration because, by their nature, they are more reliable than forecasts.[53] But it is also appropriate to have regard to future projections that cast some light on the circumstances expected to apply during the period when any adjustment will operate. It is not uncommon for actual outcomes to differ from those forecast and those differences form part of our broad assessment and consideration of the actual indicators in subsequent reviews.

We pay particular attention to trends, because of the volatility in some of the economic indicators[54] and routinely look to developments over the medium and long term, as well as to changes over the past year. This is evident in the material that is included in the Statistical Report that accompanies the Review. The longer-term perspective reduces our reliance on contemporary data that can be volatile and subject to revision. It also enables us to see the cumulative effects of the annual changes that we focus on, including our own decisions.

We also compare past forecasts with actual economic outcomes, but this is not undertaken to enable some sort of quantifiable adjustment to minimum wage outcomes. There is no formulaic relationship between changes in particular indicators or factors over time and the outcome of Reviews.

Given the range of considerations which we are required to take into account, it is neither necessary nor appropriate to quantify the weight given to particular considerations. This view is supported by the Full Court in the Penalty Rates Review decision, which held:

‘The fact that the FWC did not attempt to explain the relative weight it gave to the competing considerations in reaching its overall conclusions is immaterial. It is difficult to know how the FWC might meaningfully have done so given the nature of the decisions it was making and the broad scope of facts, matters and circumstances which fed into the conclusions (National Retail Association v Fair Work Commission [2014] FCAFC 118; (2014) 225 FCR 154 at [109]). Nothing in the statutory scheme or otherwise required the FWC to attempt to explain the relative weight it gave to the competing considerations in reaching its overall conclusions. What is apparent is that the FWC found that the relevant considerations did not all point in the same direction. They pulled in different directions, which is to be expected given the nature of the task. Provided the relevant matters were considered, the attribution of weight was wholly a matter for the FWC. That the FWC may be taken from the determinations to have given more weight to matters other than the relative living standards and needs of the low paid does not mean the FWC abdicated its responsibility for considering those matters or failed to consider them.’[55]

The Decision

The Panel received submissions from the Australian Government, several state governments, bodies that represent the interests of employees and employers, other entities and individuals. As in previous Reviews, the quantum and form of proposed increases to the NMW and/or modern award minimum wages varied significantly. The various proposals are set out in Appendix 2.

National Retail Association (NRA) and Restaurant and Catering Industrial (RCI) proposed that no increase be made to minimum wage rates. RCI argued that ‘the prevailing economic conditions do not warrant any increase’.[56] A number of other business and industry associations proposed percentage increases of varying amounts. Master Grocers Australia (MGA) proposed an increase of not more than 1.1 per cent. Australian Industry Group (Ai Group) proposed an increase of 1.8 per cent. Australian Chamber of Commerce and Industry (ACCI), Australian Business Industrial and the NSW Business Chamber Ltd (ABI and NSWBC), Australian Hotels Association (AHA), Australian Retailers Association (ARA), Australian Federation of Employers and Industries (AFEI) and Chamber of Commerce and Industry Queensland (CCIQ) all proposed an increase of no more than 1.9 per cent.

The State Governments of Queensland and Victoria proposed increasing the NMW to $722.00 per week or $19.00 per hour (an increase of $27.10 per week or about 3.9 per cent) and that modern award minimum wages be adjusted by a ‘fair and reasonable increase.’[57]

The Australian Council of Trade Unions (ACTU) proposed that the NMW and modern award minimum wages be increased by 7.2 per cent. ACCER proposed a tiered adjustment to minimum wages, the NMW to be increased to $735.00 (an increase of $40.10 per week, or about 5.8 per cent); increasing modern award minimum wages up to and including the Engineering/Manufacturing Tradesperson Level 1 (C10) rate by $32.00 per week; and increasing modern award minimum wages above the C10 rate by 3.9 per cent.

A number of submissions did not propose a particular level of increase in the NMW or modern award minimum wages, including the Australian Government and the NSW, SA and WA Governments. Australian Council of Social Service (ACOSS) proposed that the Panel ‘increase real minimum wages substantially in order to specifically reduce the gap between them and median pay levels’[58] and the Federal opposition proposed ‘a fair and economically responsible real increase.’[59]

The modern awards objective and the minimum wages objective require us to take into account various economic and labour market considerations. While some of these are specifically mentioned in the Act, the Panel also considers other relevant indicators.

While we seek to explain our view of the circumstances (including forecasts or projections) prevailing in each Review in comparison with previous years, it is not feasible to quantify the weight given to particular factors in balancing the various considerations prescribed by the Act. Rather, we consider all information about the economic and social environment that is available (including forecasts and any divergence from prior forecasts) to inform our decision.

The Panel’s approach to its statutory function is encapsulated in the following extract from the 2014–15 Review decision:

‘In taking into account available economic and social data, the Panel’s approach is broadly to assess the changes in these data from year to year and determine how they inform the statutory criteria. Put another way, and consistent with ACCI’s submission, if there were no change in the relevant considerations from one year to the next then, all other things being equal, a similar outcome would result.’[60]

Broadly speaking, differently constituted Panels should evaluate the evidence and submissions before them in accordance with a consistent and stable interpretation of the legislative framework. Justice requires consistent decision making unless a difference can be articulated and applied.[61]

The table below compares the data and Budget forecasts at the time of the 2016–17 Review with those before us in the current Review.

Table 1: Budget forecasts and actual outcomes for selected economic indicators, per cent

Information at time of 2016–17 Review			Information at time of 2017–18 Review
Indicator	Most recent data at Decision (6 June 2017)	Budget forecast for 2016–17 (Year to Jun qtr)	Budget forecast for 2017–18 (Year to Jun qtr)	Most recent data	Budget forecast for 2017–18 (Year to Jun qtr)	Budget forecast for 2018–19 (Year to Jun qtr)
Gross domestic product^(a)	2.4*	1¾	2¾	2.4*	2¾	3
(Dec qtr 2016)	(Dec qtr 2017)
Consumer Price Index^(b)	2.1^	2	2	1.9^	2	2¼
(Mar qtr 2017)	(Mar qtr 2018)
Wage Price Index^(c)	1.9^	2	2½	2.1^	2¼	2¾
(Mar qtr 2017)	(Mar qtr 2018)
Unemployment rate^(d)	5.8^#	5¾	5¾	5.5^#	5½	5¼
(April 2017)	(April 2018)
Employment growth^(c)	1.3^#	1	1½	2.9^#	2¾	1½
(April 2017)	(April 2018)
Participation rate^(d)	64.8^#	64½	64½	65.7^#	65½	65½
(April 2017)	(April 2018)

Note: Forecasts are (a) through-the-year growth rate to the June quarter, original series; (b) through-the-year growth rate to the June quarter; (c) seasonally adjusted, through-the-year growth rate to the June quarter; (d) seasonally adjusted rate for the June quarter. *Seasonally adjusted, year to December quarter 2016/2017, ^#Trend, April 2017/2018, ^Seasonally adjusted, Year to March quarter 2017/2018.

Source: Australian Government, Budget Paper No. 1: Budget Strategy and Outlook 2017–18, Canberra, p. 2-6; Australian Government, Budget Paper No. 1: Budget Strategy and Outlook 2018–19, Canberra, p. 2-6; ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2017, Catalogue No. 5206.0; ABS, Consumer Price Index, Australia, Mar 2018, Catalogue No. 6401.0; ABS, Wage Price Index, Australia, Mar 18, Catalogue No. 6345.0; ABS, Labour Force, Australia, Apr 2018, Catalogue No. 6202.0; ABS, Labour Force, Australia, Apr 2017, Catalogue No. 6202.0; [2017] FWCFB 3500.

Compared to the position at the time of the 2016–17 Review, the economic indicators now point more unequivocally to a healthy national economy and labour market. The recent data has shown strong growth in full-time employment together with a high participation rate.

As the Treasurer and the Minister succinctly put it in their post Budget correspondence:

‘The Australian economy has entered its 27^th year of economic growth and has performed remarkably well in adjusting from the investment phase of the mining boom towards broader-based sources of growth. Real GDP is forecast to grow by 2¾ per cent in 2017–18 and to accelerate further to 3 per cent growth in 2018–19 and 2019–20.’[62]

Some of the key changes to the economy evident in this Review include:

· Full-time employment grew by 3.1 per cent, significantly greater than the 1.0 per cent growth over the previous year.

· Hours worked increased by 3.3 per cent over the year to April 2018, compared with 1.8 per cent a year earlier.

· At 66.7 per cent in April 2018, the age-adjusted participation rate is at a record high and 0.8 percentage points higher than one year before.

· At 77.2 per cent, the employment to population ratio for persons aged 20–64 years, reached a historic high in December 2017.

· Strong contributions to gross domestic product (GDP) growth from non-mining business investment and household consumption.

· Business conditions are generally robust.

The labour market has improved significantly with strong employment growth of
355 200 workers over the year to April 2018, of which 256 100 were full-time employees. Employment growth of over 3 per cent recorded at the end of 2017 and in early 2018 is much higher than at the time of the last Review. Further, as pointed out by the Reserve Bank of Australia (RBA), recent employment growth has been higher than population growth.[63]

Three out of the four most award-reliant industries experienced positive growth in employment over the year. Table 2.9 in Chapter 2 shows the variation in the performance of the four industries that have the highest proportion of employees paid at the award rate. Some general conclusions may be made from the data:

· the most award-reliant industries mainly had higher than average rates of growth in output and in profits;

· with the exception of Retail trade, business entry rates exceeded exit rates, as they have for the whole economy;

· the Wage Price Index (WPI) mostly grew at a rate that was below or at the economy-wide average, and wage growth under new collective agreements was, except in Other services, mostly below average; and

· employment growth was mixed, with strong growth in employment and in hours worked in Retail trade but weaker growth, or some decline, in the other sectors.

Over the past year the unemployment rate and the underemployment rate declined only slightly, reflecting a sharp rise in the participation rate. The shift from part-time employment to full-time employment may explain some of the fall in underemployment. Despite strong employment growth, the unemployment rate dropped only 0.2 percentage points to 5.5 per cent. The strong growth in employment has not translated into a lower unemployment rate because the age-adjusted participation rate is much higher than one year ago. These indicators provide further evidence that the labour market is strengthening.

The labour market is currently supporting social inclusion through increased workforce participation and there is no evidence that this is being inhibited by the current level of minimum wages. Over the year to April 2018, the youth unemployment rate fell by 0.3 percentage points to 12.6 per cent, which is just below its average over the past five years. The persistence of long-term unemployment and the rise in disengagement among 20–24 year old adults are principally the result of rapid structural change in the economy that is causing a relatively high mismatch between the skills of the non-employed and those sought by employers. There is no evidence that it was caused by excessive levels of minimum wages.

Measures of labour productivity declined during 2017, but annual measures of productivity must be approached with caution. When measured over the course of the current business cycle, the rate of growth in labour productivity is 1.9 per cent per annum. It is likely that the measure of productivity for 2017 was affected by a surge in the total number of hours worked. Further, as noted by the RBA, recent employment growth was concentrated in household services, which typically has low measured productivity growth.[64]

GDP grew by 2.4 per cent, consistent with the five-year average for economic growth, and exceeded the average for the major seven Organisation for Economic Co‑operation and Development (OECD) countries across three of the five quarters to the December quarter 2017. Growth in 2017 was broad-based, with 16 out of 19 industries recording growth. There was a significant contraction (8.8 per cent) in one industry only, Agriculture, forestry and fishing, following growth of 22.5 per cent in that sector in 2016.

Business conditions remain positive. Profits grew by 4.3 per cent in 2017 and by 5.8 per cent in the non-mining sector. This growth, coupled with low wages growth, caused the profit share of total factor income to remain at its highest level since 2013. The business bankruptcy rate remained stable at a comparatively low level compared to the whole of the previous decade, business survival rates are the highest in at least a decade and business entry rates exceeded business exit rates by a larger than usual margin. Survey measures of overall business conditions are at their highest levels since the global financial crisis (GFC).[65]

Inflation and wages growth remain low. The Consumer Price Index (CPI) increased by 1.9 per cent over the year to the March quarter 2018 and underlying inflation and the Living Cost Index (LCI) for employee households rose by 2.0 per cent. Despite substantial employment growth, there was no appreciable acceleration in wages growth in 2017. The WPI increased by 2.1 per cent, which is slightly below the average for the last five years and historically very low, and the rate of wage increases arising from enterprise agreements is substantially below their ten-year average.

Low wages growth has significant economic and social consequences. As RBA Governor Philip Lowe has remarked sustained low wages growth diminishes the sense of shared prosperity.[66]

The economic forecasts from the Australian Government, as presented in the 2018–19 Budget, the RBA and the International Monetary Fund (IMF) all point to improving economic conditions.

The RBA’s outlook for the economy is for GDP growth to be around trend in the near term before increasing, with employment to continue to grow faster than the working-age population leading to a slight decline in the unemployment rate.[67] GDP growth is forecast to be strongest over the year to the June quarter 2019.[68]

The Budget forecasts presented in the 2016–17 Review expected wages growth, as measured by the WPI, to be 2½ per cent over 2017–18.[69] This has been reduced to 2¼ per cent in the 2018–19 Budget. The 2018–19 Budget also forecasts the WPI to increase to 2¾ percent in 2018–19 and to 3¼ percent in 2019–20. The RBA does not provide a forecast for the WPI but expects wages growth to ‘pick up only gradually as labour market spare capacity declines and any effects of structural factors that are weighing on wages growth start to dissipate.’[70]

The latest data show that the WPI increased by 2.1 per cent over the year to the March quarter 2018, having increased by 0.5 per cent in each of the last two quarters. To reach the Budget forecast for 2017–18 would require a quarterly increase of 0.7 per cent, which would be the highest increase since the March quarter 2014. Such an outcome seems unlikely.

The WPI forecast in the Budget is predicated on increased GDP growth leading to a tighter labour market and hence wages growth. Productivity growth and the forecast increases in inflation were also expected to result in an increase in the WPI.

The international experience, particularly in the United States of America (US), shows that a lower unemployment rate has not translated to stronger wages growth. The RBA has cautioned that there is uncertainty around the level of the unemployment rate consistent with full employment which could turn out to be lower than previously assumed, and that there is a risk that it may take a lower unemployment rate than currently expected to generate higher wages growth. Both the Budget and RBA forecasts are for the unemployment rate to only fall to 5¼ per cent by 2019–20.

The Budget forecasts in respect of the WPI appear overly optimistic, particularly as the RBA expects increases in wages growth to be gradual and the unemployment rate is only expected to decline slightly. For the reasons given in Chapter 2, while we expect wages growth to pick up over time, this is likely to be a more gradual process than that forecast in the Budget. We expect that our decision in this Review will result in an increase in the WPI but we do not expect any other significant sources of increase in wages growth in the short term.

As mentioned earlier, in each Review we must take into account the employment impacts of the national NMW and modern award minimum wages and any proposed increases to those rates.

We remain of the view that modest and regular minimum wage increases do not result in disemployment effects or inhibit workforce participation. Recent Australian research published by the RBA (Bishop 2018), discussed in Chapter 2, provides support for our view. Recent research in the UK continues to support this conclusion. The position is more contested in the US.

A number of parties submitted that the increase of 3.3 per cent awarded in last year’s Review was too high in the prevailing circumstances.[71] No party was able to identify any economic indicator which demonstrated any discernible detriment arising from last year’s decision. However, we accept that the 2016–17 Review increase may have longer-term effects which are not yet discernible.

As to the impact of last year’s Review decision, we note that employment continued to grow strongly in the economy generally, and it also grew in three of the four most award‑reliant industries. The increase did not lead to inflationary pressure. Nor did it have a discernible effect upon general wages growth. Surprisingly, the WPI figure over the year to the March quarter 2018 increased in two out of the four most award-reliant sectors by less than for the economy as a whole, and in all four sectors the percentage WPI increase was substantially less than the percentage increase which we awarded in the 2016–17 Review.

The prevailing economic circumstances provide an opportunity to improve the relative living standards of the low paid, and to enable them to better meet their needs.

The real value of the NMW has increased by 5.8 per cent over the last decade, and by 4.3 per cent over the past five years. However, this has not resulted in improvements to the actual or relative living standards for many categories of NMW and award-reliant households due to changes in the tax-transfer system.

The effect of taxes and transfers on the disposable incomes of the low paid is relevant to the needs of the low paid and their relative living standards, both in terms of specific changes to the tax-transfer system and in assessing broader information in relation to measures of relative income of the low paid.

There has been a decline in real disposable incomes for households that are more reliant on the tax and transfer system. Real disposable income for 11 out of 14 hypothetical NMW households fell over the year to 1 July 2017. Over the five years to July 2017, real disposable income for 10 out of 14 household types fell despite the real NMW rising by 3.9 per cent over the same period. The only family types that experienced an increase in real disposable income over the past year were single adults and couples without children. As noted by the Australian Government, increases in minimum wages in recent years have ‘been important for maintaining the real disposable incomes of many low-income households.’[72]

Consistent with the view the Panel has taken in past, we have not taken into account the measures proposed in the recent Budget which are yet to be legislated.

The minimum wage bite increased by 0.8 percentage points to 54.8 per cent between 2016 and 2017, and has increased since 2012 following a decline between 1994 and 2012. The majority of hypothetical household types on NMW or award wage rates have disposable incomes above a relative poverty line of 60 per cent of median income. However, a number of household types with a single earner and children remain below the relative poverty line at both the NMW and the C10 award wage rate. It is also notable that, despite the increase of 3.3 per cent awarded in last year’s Review, the relative position of many NMW and award-dependent household types with children vis-a-vis the relative poverty line actually deteriorated due to changes in the tax-transfer system in 2017.

The latest data suggests that income inequality in Australia has stabilised for some period with some indicators showing that income growth for households at the bottom of the distribution increased by more than for households at the top of the income distribution. However, inequality of household income remains high in Australia, relative to the past and to other comparable countries.

A new report estimating budget standards based on the Minimum Income for Healthy Living (MIHL) standard has been released since the last Review. Overall, there was low support from the parties regarding the consideration of the new budget standards for this year’s Review. Application of the budget standards concluded that, in 2016, the disposable incomes of families comprising a NMW earner who were single adults, sole parents with one child and couple households with one child (with a partner not in the labour force) were above the corresponding MIHL budget standard. The remaining two family types that were evaluated had incomes below the standard. We consider the MIHL budget standards to be useful and relevant insofar as they provide direct, if imperfect, evidence that a full time job at the NMW rate is sufficient to provide a single adult with a reasonable standard of living. This concurs with the assessment based on the 60 per cent relative poverty line.

Measures of financial stress and deprivation find that low-paid families have considerably more stress than all employee families. Rates of financial stress and deprivation fell in all 15 indicators for all employee households between 2009–10 and 2015–16, although the base for measurement is the immediate aftermath of the GFC. For low-paid families, levels of stress and deprivation on three indicators rose. They fell for the other 12 indicators, some by less than for all employee families. This suggests that the level of financial comfort for low-paid families has fallen relative to all employee families, but their absolute position has probably improved.

A number of other matters are relevant to the outcome of the Review.

The Penalty Rates decision[73] provides for the phased reduction of Sunday penalty rates in certain awards in the hospitality and retail sectors which will reduce the employment costs of some employers covered by the modern awards affected by the decision.[74] We note that there have also been other changes to modern awards that have increased employment costs. It is not appropriate to take account all of these matters in some quantifiable or mechanistic way to support a particular outcome in the Review. But these matters form part of the broad context in which the Review is conducted and are relevant considerations.

As mentioned earlier, one of the matters we are required to take into account is ‘the need to encourage collective bargaining.’ As set out in Chapter 4, while we accept that there has been a decline in current enterprise agreement making, a range of factors impact on the propensity to engage in collective bargaining, many of which are unrelated to increases in the NMW and modern award minimum wages.

We are not persuaded that the gap between modern award minimum wages and bargained wages, to the extent it can be identified with any precision, has reached a level where it is encouraging or discouraging collective bargaining.

We maintain the view expressed in past Review decisions that given the complexity of factors which may contribute to decision making about whether or not to bargain, we are unable to predict the precise impact of our decision. We cannot be satisfied that the increase we have determined will encourage collective bargaining and this is a factor to be weighed along with the other statutory considerations. However, we are also of the view that it is likely that the increase we have determined in this Review will impact on different sectors in different ways and will not, in aggregate, discourage collective bargaining.

The gender pay gap is a factor in favour of an increase in minimum wages and we have considered this together with the various statutory considerations we are required to take into account.

We conclude by noting that we have taken into account the circumstances of different regions, industries and sectors as part of our broader consideration of the national economy. These circumstances include that there are economic challenges currently facing certain regions and sectors as a result of the transition taking place in the economy and other factors including natural disasters. CCIQ again contended that there were ‘extenuating circumstances’ including Cyclone Debbie which hit North Queensland in March 2017 and more recent flooding events, which combined with ongoing drought in other parts of Queensland, warrant ‘exemption from the minimum wage adjustment for a given period.’[75] CCIQ has advanced substantially the same proposition in past Review proceedings. As the Panel has observed in past Review decisions, we accept that such events cause hardship to both employers and employees.[76] However for the reasons we have set out at length in previous Review decisions in relation to the same submission that is advanced by CCIQ in these proceedings, CCIQ has failed to address the requirements to be met by a party seeking such an exemption.[77] No exceptional circumstances are demonstrated such as to warrant a deferral of the increases we have awarded. We are not persuaded to depart from the conclusions reached in past Review decisions in respect of this issue.[78]

For completeness, we note that we also reject ARA’s proposal that we adopt an award by award approach and provide an interim decision in this Review.[79] Submissions in substantially the same terms have been made previously, and rejected in past Review decisions.[80] We are not persuaded to depart from the conclusions the Panel has reached in past decisions in respect of this issue.

The level of increase we have decided upon will not lead to undue inflationary pressure and is highly unlikely to have any measurable negative impact on employment. However, such an increase will mean an improvement in the real wages for those employees who are reliant on the NMW and modern award minimum wages and, absent any negative tax-transfer effects, an improvement in their living standards. We acknowledge that the compounding effect of increases over time may have a cumulative effect which is not apparent in the short term. We will continue to closely monitor this in future reviews.

We have determined that it is appropriate to increase the NMW. The factors identified above have led us to award an increase of 3.5 per cent. The NMW will be $719.20 per week or $18.93 per hour. The hourly rate has been calculated by dividing the weekly rate by 38, on the basis of the 38-hour week for a full-time employee. This constitutes an increase of $24.30 per week to the weekly rate or 64 cents per hour to the hourly rate.

Having regard to the proposed NMW and the other relevant considerations, we also consider that it is appropriate to adjust modern award minimum wages.

ACCER proposed a higher adjustment to the NMW than the adjustment they proposed to modern award minimum wages (or to award rates above a certain classification level), with the intention of providing a more substantial increase to the lowest paid. ACCER also contended that since the Annual Wage Review 2011–12 decision (2011–12 Review decision), the Panel has applied what it describes as a ‘wages relativities policy’, which it submits has been contrary to law.[81]

We accept that if the low paid are forced to live in poverty then their needs are not being met and that those in full-time employment can reasonably expect a standard of living that exceeds poverty levels.[82] The increases we propose to award will not lift all NMW and award-reliant employees out of poverty (measured by household disposable income below a 60 per cent median income poverty line). But to grant an increase to the NMW and modern award minimum wages the size necessary to immediately lift all full-time workers out of poverty, or an increase of the size proposed by ACCER and the ACTU, is likely to run a substantial risk of adverse employment effects. Such adverse effects will impact on those groups who are already marginalised in the labour market, with a corresponding impact on the vulnerability of households to poverty due to loss of employment or hours. An increase of the magnitude proposed by ACCER and the ACTU would also carry a substantial risk of reducing the employment opportunities for low-skilled workers, including many young persons, who are looking for work.

Workers at the lower end of the wage distribution (such as those paid the NMW), including those on modern awards who tend to have less skill than other workers, are more vulnerable to disemployment. There is no justification to increase the NMW by a higher rate than modern award minimum wages (as proposed by ACCER). To do so would create a significant risk of disemployment effects—thus putting low-paid workers at risk of unemployment and poverty. Nor would it be fair to those on higher modern award minimum wages as it would erode the recognition of their higher skill and relative ‘work value.’

As to ACCER’s ‘wages relativities policy’ argument, we considered, and rejected, a submission in substantially the same terms in the 2016–17 Review decision.[83] Nothing put in the present proceedings has persuaded us to depart from the views expressed in our previous decision.

The proposed NMW and the relevant statutory considerations have led us to increase modern award minimum wages by 3.5 per cent.

The determinations and order giving effect to our decision will come into operation on 1 July 2018. Weekly wages will be rounded to the nearest 10 cents.

Economic and Labour Market Considerations

The economic and labour market considerations required to be taken into account in relation to the minimum wages objective in s.284(1)(a) and (b) and in relation to the modern awards objective in s.134(1)(c), (d), (f) and (h) are dealt with in this chapter. In addition, the Panel also considers a range of other relevant indicators. In doing so we examine information presented in the Statistical report, in submissions from parties, and in research published or referenced in the Research reference list by the Commission.

We note at the outset the submission advanced by ABI and NSWBC that macroeconomic data are unlikely to be useful in a Review as they take a high-level view of the economy and that the Panel’s ‘primary consideration’ should be on parts of the economy most affected by Review decisions.[84] ACCI advances a submission in similar terms.[85] We do not accept this view for a number of reasons.

Firstly, although the degree of award reliance varies between industries, all industries contain a proportion of award-reliant employees, and in none are the majority of employees award reliant.[86] That requires us to have regard to developments in all industries and, in that context, macroeconomic data affecting all sectors is relevant and useful.

Secondly, the Act requires that we make a national decision concerning the NMW and to consider variations to the minimum wages prescribed in all modern awards. Noting that no party (with one possible exception[87]) has submitted that we should differentiate between modern awards in respect of minimum wage increases to arise from this Review, that necessarily requires us to pay regard to developments in the national economy as a whole.

Thirdly, the minimum wages objective in s.284(a) requires us to take into account ‘the performance and competitiveness of the national economy,’ and this must accordingly be treated as a matter of significance in the decision-making process.[88]

Fourthly, the ABI and NSWBC submission implicitly assumes that employees in a particular industry are not, in respect of minimum wage adjustments, entitled to some share in the prosperity of the national economy if that sector is not doing as well as the economy as a whole. That is an assumption which we do not accept (nor its corollary that employees in a better-performing sector should, in respect of minimum wage adjustments, not share in any mitigation that might be required if the national economy is performing poorly). In a dynamic economy, there will always be firms and industries that are doing better or worse than the economy-wide average, and there will always be firms that are failing, together with new firms that are being created. We do, however, pay close attention to developments in the most award-reliant industries as we discuss later in this chapter.

Economic growth

Annual growth in GDP over the year to the December quarter 2017 was the same as its five-year average of 2.4 per cent[89] after falling below 2 per cent early in 2017 (Chart 2.1).

Chart 2.1: Growth in GDP, annual and quarterly rates

Source: Statistical report, Chart 1.1; ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2017, Catalogue No. 5206.0.

Household consumption increased by 2.9 per cent over the year to the December quarter 2017, contributing 1.7 percentage points to GDP growth, both higher than the previous year.[90] Compensation of employees increased by 4.8 per cent over the year, largely due to strong employment growth, while the household saving ratio continued to decline, from 4.0 per cent in the December quarter 2016 to 2.7 per cent in the December quarter 2017. Public investment grew by 1.5 per cent over the year, much lower than the previous year, contributing only 0.1 percentage points of GDP growth. Exports increased by 0.8 per cent, contributing 0.2 percentage points of GDP growth. Mining; Information media and telecommunications; Rental, hiring and real estate services; Public administration and safety; and Health care and social assistance all made positive contributions to growth in the December quarter.[91]

Australia’s GDP growth exceeded the average growth rate for the major seven OECD economies in three of the five quarters to the December quarter 2017 (Chart 2.2).

Chart 2.2: International comparisons of quarterly GDP growth rates

Note: March quarter 2018 data are not yet available for Canada and Australia.

Source: OECD (2018), Quarterly GDP (indicator), <

The Panel has, for several Reviews, given consideration to real net national disposable income (RNNDI) which is influenced by movements in the terms of trade and net flows of income overseas and is a better measure of incomes available to Australians than GDP.[92] However, the Panel has noted that short-term movements in RNNDI have not formed part of its decision.[93]

Chart 2.3 shows that, despite variation during the period, GDP and RNNDI have grown at similar rates over the last 10 years. On a per capita basis, RNNDI did not grow at all in 2017[94] and remains at the same level as in 2011, having dipped during the interim due to falls in the terms of trade.

Chart 2.3: RNNDI, real GDP and the terms of trade

Source: Statistical report, Chart 1.3; ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2017, Catalogue No. 5206.0.

Some submissions were concerned that growth was not broad-based across industries and that conditions in award-reliant industries were not as strong as in other parts of the economy.[95] However, Chart 2.4 shows that gross value added (GVA) grew over the year to the December quarter 2017 in all but three of the 19 industries. Growth was highest in the award-reliant industry Accommodation and food services (6.7 per cent) as well as Health care and social assistance (6.4 per cent). GVA fell by a large –8.8 per cent in Agriculture, forestry and fishing and also fell in Other services (–0.7 per cent).

Chart 2.4: Change in GVA by industry

Source: Statistical report, Chart 1.4; ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2017, Catalogue No. 5206.0.

In relation to investment, the Australian economy was transitioning from the investment phase of the mining boom to the production phase for some time. According to the RBA, this transition is continuing, but the ‘drag from falling mining investment is expected to have disappeared completely towards the end of the forecast period; recent data suggest the trough in mining investment may occur later in 2018 or early 2019 (compared to the Bank’s expectation in February that it would be around the middle of this year).’[96] Both the RBA’s May 2018 Statement on Monetary Policy and the 2018–19 Budget point to the ‘stronger than expected’ growth in non-mining investment.[97] Non-mining business investment grew by 12½ per cent in 2017 according to the RBA.[98] Chart 2.5 presents RBA estimates of year‑ended growth in non-mining and mining investment.

Chart 2.5: Private business investment (year ended growth)

Note: Includes cultivated biological resources (mainly livestock, vineyards and orchards), computer software, research development, mineral exploration and artistic originals.

Source: RBA (2018), Statement on Monetary Policy, May, p. 22, Graph 2.3.

Productivity and unit labour costs

Both productivity and unit labour costs are relevant considerations in a Review. We have previously discussed these concepts[99] and continue to support the conclusion that ‘increases in minimum wages are more likely to stimulate productivity measures by some employers directly affected by minimum wage increases, rather than inhibit productivity.’[100]

The most recent data show that the absolute value of labour productivity across the whole economy and in the market sector declined over the course of 2017. However, we note the observation of the Australian Government that ‘productivity measures over short time periods can be volatile, cyclical and are subject to revisions.’[101] ACCER provided as an illustration of revisions to productivity estimates, that the estimate for 2004 was revised from a decline to an increase of 1.2 per cent.[102] As shown in Table 2.1, GDP per hour worked fell by 1.0 per cent and GVA per hour worked in the market sector fell by 0.9 per cent over the year to the December quarter 2017. However, it also shows that hours worked increased strongly during this period, by 3.5 per cent across the whole economy and 3.1 per cent in the market sector.

It is likely that the fall in measured labour productivity is caused in some part by the large rise in the measured number of hours worked over the year to the December quarter 2017. A similar phenomenon occurred over the year to the December quarter 2015. In that year, total hours worked rose by 2.8 per cent and GDP per hour worked fell by 0.1 per cent. As shown in Table 2.1, there is a clear negative relationship between the annual growth in hours worked and the associated growth in labour productivity. The three years of decline in labour productivity (2010, 2015 and 2017) are each associated with unusually large increases in hours worked. In the year following each of 2010 and 2015, the rate of increase of both hours worked and labour productivity returned to more usual levels. As we did in the 2015–16 Review decision, we ‘treat with caution the significantly higher hours growth reported over the year to the December quarter 2015 [2017] and the consequent reduction in productivity growth shown over the year to the December quarter 2015 [2017].’[103]

In its May 2018 Statement on Monetary Policy, the RBA points out that recent employment growth has been particularly concentrated in Health care and social assistance over the past year, with an additional 130,000 jobs in this sector. Many of these jobs are for aged and disabled carers and child care workers and they expect this growth to continue. It concludes that the concentration of employment growth in household services has contributed to low growth in labour productivity ‘because measured productivity growth in household services has typically been quite low,’ and changes in the output and quality of such services are hard to measure.[104]

Table 2.1: Productivity growth and its components, growth rate over the year

National Accounts						Labour Force
Total			Market Sector			Labour Force
Quarter	GDP	Hours worked	GDP/ hour worked	GVA	Hours worked	GVA/ hour worked	Hours worked
(% change)	(% change)	(% change)	(% change)	(% change)	(% change)	(% change)
Dec-07	3.7	3.3	0.6	3.6	3.3	0.2	3.4
Dec-08	1.6	1.1	0.6	2.7	0.9	1.8	1.1
Dec-09	2.6	–0.3	2.9	1.5	–1.4	2.9	–0.1
Dec-10	2.8	3.0	–0.2	2.8	2.2	0.6	3.3
Dec-11	3.3	1.2	2.1	3.9	0.4	3.6	0.6
Dec-12	3.0	0.5	2.5	3.8	0.5	3.2	0.8
Dec-13	2.4	0.3	2.1	2.3	–0.2	2.5	0.1
Dec-14	2.2	0.5	1.6	2.2	1.1	1.1	1.1
Dec-15	2.7	2.8	–0.1	2.7	1.4	1.2	2.5
Dec-16	2.5	0.8	1.6	2.2	0.2	2.1	0.8
Dec-17	2.4	3.5	–1.0	2.3	3.1	–0.9	3.1

Note: Data from the National Accounts are seasonally adjusted. The percentage changes are calculated in relation to the corresponding quarter of the previous year. Hours worked data from the Labour Force are expressed in trend terms. The percentage changes are calculated in relation to the corresponding month of the previous year.

Source: Statistical report, Table 2.2; ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2017, Catalogue No. 5206.0; ABS, Labour Force, Australia, Apr 2018, Catalogue No. 6202.0.

Trends in productivity measures over the 10 years to the December quarter 2017 are presented in Chart 2.6.

Chart 2.6: Measures of labour productivity

Note: Labour productivity is measured as real GDP per hour worked. Gross value added measures the value of output at basic prices minus the value of intermediate consumption at purchasers’ prices. The market sector includes all industries except for Public administration and safety, Education and training and Health care and social assistance.

Source: Statistical report, Chart 2.1; ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2017, Catalogue No. 5206.0.

We have previously concluded that short-term trends in labour productivity should be treated with caution as productivity is best measured over the business cycle, which is problematic as the business cycle does not align with the period of a Review.[105] A number of parties supported the assessment of productivity growth over the longer term or over cycles.[106] No party submitted that we should pay primary regard to the measurement of productivity over the most recent 12 months. However, we note that there appears to be no growth in labour productivity, measured as GVA per hour worked in the market sector, over the past 18 months, as shown in Chart 2.6. If this trend continues over a longer period, that is a matter to which the Panel would need to give greater weight in future Reviews, but for the reasons earlier given in paragraph [123] above we do not expect this trend to continue.

Chart 2.7 presents changes in labour productivity over the most recent cycles together with its components: multifactor productivity and capital deepening. Since the last Review, the Australian Bureau of Statistics (ABS) has revised the time period of the last two business cycles and this is reflected in the chart. In last year’s Review, the current business cycle was estimated to have begun in 2007–08, however, this has been revised to 2011–12.

Ai Group submitted that productivity growth ‘has been exceedingly weak over the past decade and over the current productivity growth cycle.’[107] This proposition is not supported by the available statistical material, nor by the Australian Government submission. The Australian Government submitted: ‘… labour productivity in the whole economy has grown at an average annual rate of 1.5 per cent over the past five years. This compares with a long‑term average of 1.6 per cent over the past 30 years.’[108] Chart 2.7 shows that productivity growth was higher over the most recent cycle compared with the previous one, though it was lower than the 1998–99 to 2003–04 business cycle. The chart shows that, in contrast to the previous cycle, a substantial proportion of the labour productivity growth in the current cycle has been due to multifactor productivity improvements, and not just due to capital deepening as in the previous cycle.

Chart 2.7: Productivity cycles, annualised growth in labour productivity

Note: Multifactor productivity is measured as output per combined unit of labour and capital. Capital deepening is the component of labour productivity growth which is due to the increase in the amount of capital that each unit of labour has to work with. Labour productivity is represented by the numbers above the bars, and is the sum of multifactor productivity and capital deepening. As a result of ABS revisions to the National Accounts, the productivity growth cycle has changed. The 2007–08 peak previously identified in the last publication has been revised to 2011–12.

Source: Statistical report, Chart 2.2; ABS, Australian System of National Accounts, 2016–17, Catalogue No. 5204.0.

The ACTU referred to recent research from the Commonwealth Treasury (Campbell and Withers 2017, cited in the Research reference) list, that examined the impact of structural change on Australian productivity trends. The ACTU highlighted from this research that ‘it is labour productivity growth in the services sectors that has been underpinning aggregate productivity growth in Australia over recent decades.’[109] Over half of annual aggregate labour productivity growth was from growth within the services sector and around one-quarter was attributable to mining. The research found that aggregate productivity growth is driven overwhelmingly by within-sector productivity growth rather than across sectors (that is, a structural shift from lower to higher productivity industries), except during a mining boom period. Just over 90 per cent of aggregate labour productivity growth came from the within‑sector contribution from the period 1989–90 to 2015–16.[110]

In another paper included on the Research reference list, the Productivity Commission determined that structural change had a negative effect on productivity growth as Australia saw a long-term shift towards more labour-intensive service industries which, on average, have lower levels of productivity. This change is likely to reduce labour productivity growth during the adjustment following the mining boom period.[111]

[253] Borland J (2018), A review of the methods applied in international research on the employment effect of the minimum wage, and implications for Australia, Fair Work Commission Research Report 4/2018, February, p. 18.

[254] Reich M, Allegretto S & Godoey A (2017), Seattle’s minimum wage experience 2015–16, Center on Wage and Employment Dynamics Policy Brief, June, p. 3.

[255] Reich M, Allegretto S & Godoey A (2017), Seattle’s minimum wage experience 2015–16, Center on Wage and Employment Dynamics Policy Brief, June, p. 3.

[256] Jardim E, Long MC, Plotnick R, van Inwegen E, Vigdor J & Wething H (2017), Minimum wage increases, wages, and low-wage employment: evidence from Seattle, NBER Working Paper 23532, June.

[257] Zipperer B & Schmitt J (2017), The ‘high road’ Seattle labor market and the effects of the minimum wage increase: data limitations and methodological problems bias new analysis of Seattle’s minimum wage increase, Economic Policy Institute, June, Summary.

[258] Neumark D (2017), The employment effects of minimum wages: some questions we need to answer, NBER Working Paper 23584, October, p. 3.

[259] Totty E (2017), ‘The effect of minimum wages on employment: A factor model approach’, Economic Inquiry, Vol. 55, No. 4, October at p. 1712.

[260] Totty E (2017), ‘The effect of minimum wages on employment: A factor model approach’, Economic Inquiry, Vol. 55, No. 4, October at p. 1722.

[261] Totty E (2017), ‘The effect of minimum wages on employment: A factor model approach’, Economic Inquiry, Vol. 55, No. 4, October at p. 1735.

[262] ACTU submission, 13 March 2018 at para. 62.

[263] ACTU response to questions on notice, 9 April 2018 at pp. 21–26.

[264] Ai Group response to questions on notice, 9 April 2018 at p.11.

[265] Ai Group response to questions on notice, 9 April 2018 at pp. 11–12.

[266] ACCI response to questions on notice, 9 April 2018 at para. 77.

[267] Australian Government response to questions on notice, 18 May 2018 at p. 4.

[268] [2017] FWCFB 3500 at [528].

[269] ACTU submission, 13 March 2018 at para 62.

[270] See ACCI response to questions on notice, 9 April 2018 at paras 43–45.

[271] [2017] FWCFB 3500 at [564]; [2016] FWCFB 3500 at [493]; [2015] FWCFB 3500 at [436]; [2013] FWCFB 4000 at [461].

[272] [2017] FWCFB 3500 at [564]; [2016] FWCFB 3500 at [493]; [2015] FWCFB 3500 at [437].

[273] [2017] FWCFB 3500 at [565].

[274] Australian Government submission, 13 March 2018 at para. 241.

[275] Australian Government submission, 13 March 2018 at para. 241.

[276] Australian Government submission, 13 March 2018 at para. 242.

[277] [2017] FWCFB 3500 at [566].

[278] Statistical report, Chart 3.3.

[279] [2017] FWCFB 3500 at [92]; [584].

[280] [2017] FWCFB 3500 at [93].

[281] See [2017] FWCFB 3500 at [360]–[362].

[282] ABS, Microdata: Household Expenditure, Income and Housing, 2015-16, Detailed Microdata, DataLab, Catalogue No. 6540.0

[283] Statistical report, Chart 7.1.

[284] Yuen K, Ellis G &Nelms L (2018), Characteristics of workers earning the national minimum wage rate and of the low paid, Fair Work Commission Research Report 3/2018, February.

[285] Australian Government submission, 13 March 2018 at para. 21.

[286] Australian Government submission, 13 March 2018 at para. 21.

[287] [2017] FWCFB 3500 at [369].

[288] Yuen K, Ellis G &Nelms L (2018), Characteristics of workers earning the national minimum wage rate and of the low paid, Fair Work Commission Research Report 3/2018, February, p. 17.

[289] [2017] FWCFB 3500 at paras [54]; [373].

[290] Australian Government submission, 13 March 2018 at Table A.2 pp. 80–81.

[291] Victorian Government submission, 13 March 2018 at para. 119.

[292] ACOSS submission, 16 March 2018 at p. 5.

[293] ACOSS submission, 16 March 2018 at p. 15.

[294] ACOSS submission, 16 March 2018 at p. 9.

[295] Australian Government submission, 13 March 2018 at paras 42–51.

[296] [2016] FWCFB 3500 at [455].

[297] [2017] FWCFB 3500 at [380]; [2016] FWCFB 3500 at [403]–[404].

[298] Australian Government submission, 13 March 2018 at para. 48.

[299] [2016] FWCFB 3500 at [410].

[300] [2017] FWCFB 3500 at [93]; [2016] FWCFB 3500 at [101].

[301] [2016] FWCFB 3500 at [391].

[302] Australian Government submission, 13 March 2018 at para. 264.

[303] Australian Government submission, 13 March 2018 at para. 269; see also Table 8.5.

[304] Australian Government submission, 13 March 2018 at para. 273.

[305] [2017] FWCFB 3500 at [416].

[306] [2017] FWCFB 3500 at [421]. Australian Government, Budget 2015–16 Families Package, Canberra, viewed 26 March 2018, < Federal opposition submission, 13 March 2018 at para. 57.

[308] Ai Group submission, 13 March 2018 at p. 42.

[309] Department of Human Services (2018), How your income affects Child Care Subsidy, viewed 25 May 2018 Department of Human Services (2018), Income test for Child Care Benefit, viewed 25 May 2018

[311] Birmingham S, Senator (2017), More child care support for the families that need it most, < 12 November.

[312] Australian Government submission, 13 March 2018 at para. 273.

[313] Australian Government submission, 13 March 2018 at p. 62.

[314]Australian Government, Budget Paper No. 2: Budget Measures 2015–16, Canberra, p. 20; Australian Government, Budget Paper No. 2: Budget Measures 2016–17, Canberra, p. 41.

[315] Australian Government response to questions for consultation, 11 May 2018, at p. 4.

[316] ACTU response to questions for consultation, 11 May 2018 at pp. 5–6.

[317] [2017] FWCFB 3500 at [425].

[318] [2017] FWCFB 3500 at [444].

[319] Australian Government submission, 13 March 2018 at para. 260.

[320] ACOSS submission, 16 March 2018 at p. 9; Federal opposition submission, 13 March 2018 at para. 47.

[321] Australian Government submission, 13 March 2018 at para. 258.

[322] Australian Government response to questions on notice, 9 April 2018 at p. 14.

[323] ACCI submission in reply, 9 April 2018 at paras 100; 102.

[324] ACTU submission in reply, 9 April 2018 at p. 29.

[325] RCI response to questions on notice, 13 April 2018 at p. 8.

[326] Australian Government submission, 13 March 2018 at para. 32.

[327] Australian Government submission, 13 March 2018 at paras 29–30.

[328] [2017] FWCFB 3500 at [444].

[329] The equivalence scale most commonly used is the ‘OECD-modified scale’ which assigns a value of 1 to the first adult member, 0.5 for each additional adult member and 0.3 for each child.

[330] Gini coefficient values range between 0 and 1, where values closer to zero represent lower income inequality and values closer to one represent a higher income inequality.

[331] Australian Government submission, 13 March 2018 at para. 251; Wilkins R (2017), The Household, Income and Labour Dynamics in Australia Survey: Selected Findings from Waves 1 to 15, Melbourne Institute, University of Melbourne, Melbourne, calculated from Table 3.2.

[332] Australian Government submission, 13 March 2018 at para. 252; [2017] FWCFB 3500 at para. 458.

[333] [2017] FWCFB 3500 at [63]; [484].

[334] ACTU submission, 13 March 2018 at para. 232.

[335] ACTU submission, 13 March 2018 at para. 238–255.

[336] ACTU submission, 13 March 2018 at para. 238.

[337] [2017] FWCFB 3500 at [460]–[461].

[338] [2017] FWCFB 3500 at [461].

[339] Saunders P & Bedford M (2017), New minimum income for healthy living budget standards for low-paid and unemployed Australians’, SPRC Report 11/17, Social Policy Research Centre, UNSW Sydney.

[340] [2017] FWCFB 3500 at [463].

[341] [2017] FWCFB 3500 at [463], Table 5.9.

[342] ACOSS submission, 16 March 2018 at p. 11.

[343] ACOSS submission, 16 March 2018 at p. 5.

[344] [2017] FWCFB 3500 at [467].

[345] ACCER submission, 13 March 2018 at para. 41.

[346] ACCER submission, 13 March 2018 at paras 82–84.

[347] ACCER submission, 13 March 2018 at para. 189.

[348] Australian Government submission, 13 March 2018 at Table A.2, p. 80.

[349] Statistical Report, Table 7.5.

[350] For example, [2016] FWCFB 3500 at para. 441.

[351] [2016] FWCFB 3500 at [442]. Referring to Fair Work Australia (2011), Measuring the Needs of the Low Paid, Report to the Minimum Wage Panel, 14 December, PR517718.

[352] [2017] FWC 4193 at [2].

[353] Saunders P and Bedford M (2017), New minimum income for health living budget standards for low-paid and unemployed Australians’, SPRC Report 11/17, Social Policy Research Centre, UNSW Sydney.

[354] [2017] FWC 4403.

[355] [2017] FWCFB 4885.

[356] [2017] FWCFB 4885 at [8].

[357] Saunders P & Bedford M (2017), New minimum income for healthy living budget standards for low-paid and unemployed Australians’, SPRC Report 11/17, Social Policy Research Centre, UNSW Sydney, p. 29.

[358] Saunders P & Bedford M (2017), New minimum income for healthy living budget standards for low-paid and unemployed Australians’, SPRC Report 11/17, Social Policy Research Centre, UNSW Sydney, p. 16.

[359] Saunders P & Bedford M (2017), New minimum income for healthy living budget standards for low-paid and unemployed Australians’, SPRC Report 11/17, Social Policy Research Centre, UNSW Sydney, p. 103, Table 5.17.

[360] ACOSS submission, 13 March 2018 at p. 26.

[361] ACOSS submission, 13 March 2018 at p. 28.

[362] Such as ACCI submission, 13 March 2018 at paras 184; 187; 188; ACOSS submission, 13 March 2018 at p. 27.

[363] ACTU submission, 13 March 2018 at paras 286–287.

[364] ACTU submission, 13 March 2018 at para. 290.

[365] ACCI submission, 13 March 2018 at para. 167.

[366] ACCI submission, 13 March 2018 at paras 168; 179.

[367] ACCER submission, 13 March 2018 at para. 108; [2017] FWCFB 3500 at paras 53; 362.

[368] ACCER submission in reply, 9 April 2018 at para. 53.

[369] Saunders P & Bedford M (2017), New budget standards for low-paid and unemployed Australians – project design, methods and key findings, Social Policy Research Centre, UNSW, presentation to the Fair Work Commission, 27 November, Slide 16.

[370] ACCER submission, 13 March 2018 at para. 48.

[371] ACCI submission, 13 March 2018 at para. 170.

[372] [2013] FWCFB 4000 at [417].

[373] Statistical Report—Annual Wage Review 2014–15, at Table 10.1.

[374] Statistical Report—Annual Wage Review 2014–15, at Table 10.1.

[375] [2017] FWCFB 3500 at [471]; [2016] FWCFB 3500 at [443]; [2015] FWCFB 3500 at [398]; [2014] FWCFB 3500 at [379].

[376] Australian Government submission, 13 March 2018 at para. 224, Table 7.4.

[377] Fair Work Act 2009, s.3(f).

[378] ACTU submission, 13 March 2018 at para. 467.

[379] ACTU submission, 13 March 2018 at paras 468–469.

[380] [2017] FWCFB 3500 at [598].

[381] [2017] FWCFB 3500 at [593].

[382] [2017] FWCFB 3500 at [610].

[383] Peetz D & Yu S (2017), Explaining recent trends in collective bargaining, Fair Work Commission, Research Report 4/2017, February.

[384] [2017] FWCFB 3500 at [609]; Peetz D & Yu S (2017), Explaining recent trends in collective bargaining, Fair Work Commission, Research Report 4/2017, February.

[385] [2017] FWCFB 3500 at [606]–[607].

[386] Peetz D & Yu S (2018), Employee and employer characteristics and collective agreement coverage, Fair Work Commission, Research Report 1/2018, February.

[387] Peetz D & Yu S (2018), Employee and employer characteristics and collective agreement coverage, Fair Work Commission, Research Report 1/2018, February, p. 11.

[388] ACTU submission, 13 March 2018 at para. 466; O’Neill B (2015), General Manager’s report into developments in making enterprise agreements under the Fair Work Act 2009 (Cth), 2012–2015, p. 9.

[389] ACTU submission, 13 March 2018 at para. 466.

[390] Australian Government submission, 13 March 2018 at paras 216–217.

[391] Australian Government submission, 13 March 2018 at para. 218.

[392] ACCI submission, 13 March 2018 at para. 227.

[393] ACCI submission, 13 March 2018 at para. 226.

[394] Small differences between the numbers in the ACCI submission and the December quarter may reflect minor revisions to the data.

[395] Department of Jobs and Small Business, Workplace Agreements Database, December quarter 2017. This estimate excludes pre-Fair Work Act agreements that had an expiry date before 1 July 2009, as it is likely that these agreements are not still operational.

[396] There may be other reasons why expired agreements have not been terminated or replaced other than those undergoing the bargaining process. For example, the business may have ceased to trade, or the company may not have any employees on these agreements.

[397] Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Limited Retail Agreement 2011 (AG2011/10901); Woolworths National Supermarket Agreement 2012 (AF2012/11791); Big W Stores Certified Agreement 2012 (AG2012/13369); The Kmart Australia Ltd Agreement 2012 (AG2012/5509); Target Australia Retail Agreement 2012 (AG2012/12158).

[398] Coles Supermarkets Enterprise Agreement 2017 (AG2018/750). The 2018 Coles Agreement does not cover employees in Bi-Lo stores who were covered by the 2011 Agreement.

[399] Note that the collective agreements from the Employee Earnings and Hours survey include registered federal and state agreements, and non-registered agreements, while the WAD only contains registered federal agreements. That said, federal enterprise agreements account for around four in five collective agreements.

[400] Department of Jobs and Small Business, Trends in Federal Enterprise Bargaining, December quarter 2017, p. 22.

[401] Department of Jobs and Small Business, Trends in Federal Enterprise Bargaining, December quarter 2017.

[402] Fair Work Commission (2018), Agreements in progress, Department of Jobs and Small Business, Trends in Federal Enterprise Bargaining, September quarter 2017, p. 51.

[404] ACTU submission, 13 March 2018 at para. 474.

[405] Australian Government submission, 13 March 2018 at p. 12.

[406] ACTU submission, 13 March 2018 at para. 61.

[407] ACTU submission, 13 March 2018 at para. 470.

[408] ACTU submission, 13 March 2018 at para. 463.

[409] ACTU submission, 13 March 2018 at paras 464–465.

[410] Federal opposition, submission 13 March 2018 at paras 77–87.

[411] Queensland Government submission, 19 March 2018 at p. 13.

[412] AFEI submission, 13 March 2018 at paras 72–73.

[413] Ai Group submission, 13 March 2018 at p. 43.

[414] Ai Group submission, 13 March 2018 at p. 43.

[415] [2017] FWCFB 3500 at [658].

[416] Ai Group submission, 13 March 2018 at pp. 44–45.

[417] ACCI submission, 13 March 2018 at paras 220; 222.

[418] [2017] FWCFB 3500 at [636].

[419] ACTU submission, 13 March 2018 at para. 481.

[420] ACTU submission, 13 March 2018 at para. 483.

[421] ACCER submission in-reply and response to questions on notice, 9 April 2018 at para. 67.

[422] ACCER submission in-reply and response to questions on notice, 9 April 2018 at para. 68.

[423] ACCI submission in-reply, 9 April 2018 at para. 111.

[424] ACCI submission in-reply, 9 April 2018 at para. 32.

[425] ACCI submission in-reply, 9 April 2018 at paras 111–112.

[426] Allianz Insurance Limited v GSF Australia Ltd (2005) 221 CLR 568 at [12]-[13] per McHugh J.

[427] [2015] FWCFB 8200.

[428] Ibid at [280].

[429] [2015] FWCFB 8200 at [290].

[430] Penalty Rates decision [2017] FWCFB 1001 at [216].

[431] [2016] FWCFB 3500 at [545].

[432] Statistical report, Table 11.1.

[433] Peetz D & Yu S (2018), Employee and employer characteristics and collective agreement coverage, Fair Work Commission, Research Report 1/2018, February, p. 10.

[434] Rozenbes D & Farmakis-Gamboni S (2015), Earnings and characteristics of employees by gender and industrial arrangement, report for the Pay Equity Unit of the Fair Work Commission, December; and Broadway B & Wilkins R (Melbourne Institute of Applied Economic and Social Research) (2015), Low-paid women’s workforce participation decisions and pay equity, report for the Pay Equity Unit of the Fair Work Commission, December.

[435] Australian Government submission, 13 March 2018 at para 276.

[436] Australian Government submission, 13 March 2018 at para 276, Table 8.7.

[437] Broadway B & Wilkins R (2017), Probing the effects of the Australian system of minimum wages on the gender wage gap, Melbourne Institute of Applied Economics and Social Research, Working Paper No. 31/17, p. 12.

[438] Broadway B & Wilkins R (2017), Probing the effects of the Australian system of minimum wages on the gender wage gap, Melbourne Institute of Applied Economics and Social Research, Working Paper No. 31/17, p. 13.

[439] Broadway B & Wilkins R (2017), Probing the effects of the Australian system of minimum wages on the gender wage gap, Melbourne Institute of Applied Economics and Social Research, Working Paper No. 31/17, pp. 16–17.

[440] Broadway B & Wilkins R (2017), Probing the effects of the Australian system of minimum wages on the gender wage gap, Melbourne Institute of Applied Economics and Social Research, Working Paper No. 31/17, pp. 14–15.

[441] Broadway B & Wilkins R (2017), Probing the effects of the Australian system of minimum wages on the gender wage gap, Melbourne Institute of Applied Economics and Social Research, Working Paper No. 31/17, p. 22.

[442] Broadway B & Wilkins R (2017), Probing the effects of the Australian system of minimum wages on the gender wage gap, Melbourne Institute of Applied Economics and Social Research, Working Paper No. 31/17, p. 24.

[443] Broadway B & Wilkins R (2017), Probing the effects of the Australian system of minimum wages on the gender wage gap, Melbourne Institute of Applied Economics and Social Research, Working Paper No. 31/17, p. 24.

[444] Victorian Government submission, 13 March 2018 at para 103.

[445] Western Australian Government submission, 13 March 2018 at para 63.

[446] Victorian Government submission, 13 March 2018 at para. 103; Broadway B & Wilkins R (2017), Probing the Effects of the Australian System of Minimum Wages on the Gender Wage Gap, Melbourne Institute of Applied Economic & Social Research, Working Paper No. 31/17, December, p. 25.

[447] Queensland Government submission, 19 March 2018 at p. 13.

[448] Federal Opposition submission, 13 March 2018 at para. 69.

[449] ACTU submission, 13 March 2018 at para. 484.

[450] ACTU submission, 13 March 2018 at para. 487.

[451] ACTU submission in-reply, 13 April 2018 at p. 19.

[452] ACTU submission in-reply, 13 April 2018 at p. 19.

[453] ACCER submission, 13 March 2018 at para. 280.

[454] ACCER submission, 13 March 2018 at para. 276.

[455] ACCER submission, 13 March 2018 at para. 281.

[456] ACCER submission, 13 March 2018 at paras 278; 280.

[457] ACCI submission in-reply, 9 April at para. 28.

[458] ACCI submission in-reply, 9 April at paras 28–29.

[459] ACCI submission in-reply, 9 April at para. 33.

[460] [2016] FWCFB 3500 at [546].

[461] [2017] FWCFB 3500 at [654].

[462] Broadway B. and Wilkins R. (2007) Probing the Effects of the Australian System Minimum Wages on the Gender Wage Gap, Working Paper No. 31/17, p. 13.

[463] Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, s.22. Note 2012–13 decision [2013] FWAFB 4000 at [550]–[553] clarifies these are different categories of transitional instrument.

[464] Some Division 2A State reference transitional awards may still operate such as where they are related to awards that have not been terminated under the termination of instruments process.

[465] Some Division 2B State reference transitional awards may still operate such as where they are related to awards that have not been terminated under the termination of instruments process.

[466] Some Division 2B State awards may still operate such as where they cover: employees also covered by enterprise instruments; or State reference public sector awards.

[467] Two transitional pay equity orders currently operate, created under item 43 of Sch. 3, and item 30A of Sch. 3A, of the Transitional Act respectively. The Panel must review and may make a determination varying the transitional pay equity order created under sub item 30D(1) of Sch. 3A, to the extent that it is derived from the Queensland Community Services and Crisis Assistance Award – State 2008 (Regs 3A.01B).

[468] See discussion further for whom these instruments apply [2013] FWCFB 4000 at [550]–[561].

[469] [2010] FWAFB 4000 at [370]–[396].

[470] Dunn A & Bray G (2010), Minimum wage transitional instruments under the Fair Work Act 2009 and the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, Research Report 06/2010, Fair Work Australia, June 2010.

[471] Fair Work Commission (2017), Background Paper: Annual Wage Review 2016–17 –– Transitional Instruments, 19 September.

[472] [2018] FWCFB 2 at [8]–[20].

[473] Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, items 5(1)–(5) and 9(4) of Sch. 6.

[474] Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, items 5(3), 6 and 10(1) of Sch. 6A.

[475] For example, certain instruments that covered employees who were also covered by the Social, Community, Home Care and Disability Industry Award 2010 were preserved by the Award Modernisation – Termination of Modernisable Instruments decision [2010] FWAFB 9916 at [44]. As at the date of this decision, they have not been terminated.

[476] A more detailed outline of these instruments can be found at [2013] FWCFB 4000 at [553]–[559]; and [2017] FWCFB 1931 at [81].

[477] Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, items 10 and 20 of Sch. 9, items 7 and 12A(5)of Sch. 3.

[478] Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, items 7-8 of Sch. 9, and item 3(2) of Sch. 5.

[479] For example, Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, item 20(1) of Sch 3.

[480] [2017] FWCFB 3500 at [687]–[689].

[481] All Trades Queensland Pty Limited [2016] FWC 2832.

[482] All Trades Queensland Pty Ltd v Construction, Forestry, Mining and Energy Union, Communications, Electrical, Energy, Information, Postal, Plumbing and Allied Services Union and Australian Manufacturing Workers’ Union [2017] FWCFB 132.

[483] [2017] FCAFC 189 at [58].

[484] All Trades Queensland Pty Limited v Construction, Forestry, Mining and Energy Union [2017] FCAFC 189 at [58].

[485] Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, item 2(5) of Sch. 3.

[486] NAPSAs were established by Sch. 8 of the Workplace Relations Act 1996, as amended by the Workplace Relations Amendment (Work Choices) Act 2005. They are transitional instruments applicable to employees who previously had their terms of employment determined by a State award, but who have been brought into the federal industrial relations system.

[487] [2017] FCAFC 189 at [40]; Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, item 20(1) of Sch. 3.

[488] [2017] FCAFC 189 at [26].

[489] [2010] FWAFB 9916 at [41]–[44].

[490] Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, item 10(1) of Sch. 9 and item 12A of Sch. 3.

[491] [2017] FWCFB 1931.

[492] [2017] FWCFB 1931 at [142]–[155].

[493] The Fair Work (Transfer of Business) Amendment Act 2012, which commenced on 4 5 December 2012, introduced Part 6.3 into the Act. A copied State award continues to operate under the national system for a period of five years, unless terminated or extended by regulation. See s.768AO of the Fair Work Act2009.

[494] The provisions of the Fair Work (Transitional Provisions and Consequential Amendments) Regulations 2009 dealing with the variation of Division 2B State awards in annual wage reviews also apply to copied State awards. Sections 768BY and 768AW(b) of the Fair Work Act2009.

[495] [2018] FWCFB 2.

[496] [2018] FWCFB 2 at [43].

[497] ACTU submission, 13 March 2018 at para 503.

[498] ACTU submission, 13 March 2018 at para 504; ACTU submission in reply, 9 April 2018 at p. 19.

[499] CPSU submission, 24 April 2018 at para 2.

[500] ABI and NSWBC submission, 13 March 2018 at p. 37.

[501] ACCI response to questions on notice, 9 April 2018 at para. 37; RCI made a similar submission in its response to questions on notice, 9 April 2018 at p. 5.

[502] Fair Work Act 2009, s.284(3).

[503] ACTU submission, 13 March 2018 at para 492.

[504] ACTU submission, 13 March 2018 at paras 493–494.

[505] Ai Group submission, 13 March 2018 at p. 48.

[506] ABI and NSWBC submission, 13 March 2018 at p. 36.

[507] ACTU submission, 13 March 2018 at paras 493–495.

[508] Ai Group submission, 13 March 2018 at p. 48.

[509] ABI and NSWBC submission, 13 March 2018 at p. 36.

[510] ACTU submission, 13 March 2018 at para. 496.

[511] ACTU submission, 13 March 2018 at para. 495.

[512] ACTU submission, 13 March 2018 at para. 495.

[513] ACTU submission, 13 March 2018 at para. 495.

[514] Ai Group submission, 13 March 2018 at p. 48.

[515] Australian Government submission, 13 March 2018 at para. 138.

[516] Victorian Government submission, 13 March 2018 at para. 136.

[517] [2016] FWCFB 3500 at paras 608; 650.

[518] Fair Work Act 2009, s.295(1)(b).

[519] ACTU submission, 13 March 2018 at para. 498.

[520] Ai Group submission, 13 March 2018 at p. 50.

[521] ABI and NSWBC submission, 13 March 2018 at p. 36.

[522] [2015] FWCFB 3500 at [560].

[523] [2016] FWCFB 3500 at [640].

[524] ACTU submission, 13 March 2018 at para. 499.

[525] Ai Group submission, 13 March 2018 at p. 50.

[526] ABI and NSWBC submission, 13 March 2018, at p. 36.

[527] [2018] FWCFB 3500 at [665].

[528] Fair Work Act2009, s.294(1)(b).

[529] ACTU submission, 13 March 2018 at para. 493.

[530] ACOSS submission, 16 March 2018 at p. 18.

[531] Ai Group submission, 13 March 2018 at p. 50.

[532] ABI and NSWBC submission, 13 March 2018 at p. 35.

[533] Ai Group submission, 13 March 2018 at p.50.

[534] ABI and NSWBC submission, 13 March 2018 at pp. 35–36.

[535] [2017] FWCFB 3500 at [739].

[536] ACTU submission, 13 March 2018 at para. 497.

[537] Ai Group submission, 13 March 2018 at p. 48.

[538] ABI and NSWBC submission, 13 March 2018 at p. 35.

[539] Ai Group submission, 13 March 2018 at p. 48.

[540] ABI and NSWBC submission, 13 March 2018 at p. 35.

[541] ACTU submission, 13 March 2018 at para. 497.

[542] MA000103.

[543] [2017] FWCFB 3500 at [740].

[544] [2017] FWCFB 5073.

[545] [2018] FWCFB 2196.

[546] [2018] FWCFB 2196 at [15].

[547] ACOSS submission, 16 March 2018 at pp. 46–47.

[548] ACOSS submission to 2016–17 Review at p. 37; ACOSS submission to 2015–16 Review at pp. 38–39; ACOSS submission to 2014–15 Review at pp. 52–53; ACOSS submission to 2013–14 Review at pp. 59–60; ACOSS submission to 2012–13 Review at pp. 58–59; ACOSS submission to 2011–12 Review at p. 57; ACOSS submission to 2010–11 Review at pp. 45–46 and ACOSS submission to 2009–10 Review at p. 46.

[549] ACOSS submission, 16 March 2018 at p. 47.

[550] [2017] FWCFB 3500 at [737].

[551] Borland, J (2018), Part II: Prospects for research on employment effects of minimum wages in Australia, Outcomes from the Fair Work Commission research roundtable, Fair Work Commission, Research report 4/2018, March.

[552] Richardson, S (2018), The UK evaluation of the impacts of increases in their minimum wage, Discussion paper prepared for the Fair Work Commission research roundtable, Fair Work Commission, March.

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